Top shops grow profits through economic turmoil

An annual report into the world's biggest retailers shows most have sailed through the economic downturn with ease.

The Global Powers of Retailing report by international consultancy firm Deloitte, shows the world's top 250 retailers grew their profits by 5.1 per cent, despite tough economic conditions in most developed nations.

These global giants of retail raked in a combined $4.2 trillion in revenue in financial year 2011, despite that being a year where many share markets dived and the very future of bricks and mortar retail was called into question in some countries, including Australia.

US giant Wal-Mart remained the world's biggest retailer, with almost four times more sales than its next biggest rival, France's Carrefour.

Deloitte's Australian retail leader, David White, says the top 250 retailers appear to have outperformed many of their mid-sized and small rivals because they have been able to move into markets offering better growth prospects.

"One of the trends that we've seen is global retailers expanding overseas, where obviously you need a reasonable amount of resources and know-how to be able to do that," he observed.

"We've seen that in Australia, but also some of the fast growing markets in Asia."

Mr White says that trend is likely to continue, with US giants Williams Sonoma (Pottery Barn) and Abercrombie & Fitch planning to open flagship stores in Australia this year, and other overseas-based retailers already operating here planning to expand.

"2013 we already know of number of North American, UK companies are looking to move overseas and moving into Australia, so definitely that trend will continue in 2013, and probably we'll see that over the next two or three years," he said.

Market dominance

While foreign retail giants were generally looking for overseas expansion to fuel growth, Australia's big retailers took a different tack.

Only two Australian companies made the list - retail conglomerates Woolworths and Wesfarmers were the only local retailers to have the requisite $3.5 billion in turnover to make the top 250.

The two supermarket, liquor, fuel, discount department store and hardware giants were both inside the top twenty - Woolworths at 17 and Wesfarmers at 18 with around $50 billion in revenue - and were virtually unique in their reliance on a relatively small domestic market for almost all their sales.

Out of the top 20 firms, 13 had operations in at least five countries and, aside from the two Australian giants, the others that were only focused on one or two national markets were either US or German firms with large home markets.

Mr White says Woolworths and Wesfarmers have such market dominance here they have not yet paid much attention to expanding overseas, instead expanding into different retail sectors domestically.

"They've got such a strong brand in Australia and such a strong presence that they've managed to achieve their growth through focussing on domestic channels," he said.

However, Mr White says Australian retailers should not ignore overseas opportunities much longer, with the nation well positioned to take advantage of the growing Asian middle class.

"One of the major markets that a lot of people are looking at is China, with somewhere over a $2 trillion retail market there, with growth rates over 10 per cent," he said.

"So China and a number of other countries in Asia clearly have opportunities for Australian retailers, and were already seeing some retailers have success."

Four of the fifty fastest growing retailers were Chinese firms, with hypermarket Wu-Mart recording 94 per cent revenue growth in 2011 and averaging 40 per cent growth over the past five years, despite the global financial crisis.

Caught in the web

Despite the rapid rise of internet shopping, the world's biggest online specialist non-store retailer, Amazon, only ranked 23rd in the amount of revenue it generated, with supermarkets, hypermarkets and discount department stores still dominating the top spots.

Only four non-store retailers made the top 250 firms, although many of the large store-based firms have also started to sell significant volumes of goods on the internet.

David White says, even though the vast bulk of retail transactions still take place in-store, the web has had a significant impact on physical sales.

"Many consumers these days now check the prices with hand held devices before making a purchase," he observed.

"The days of limited information for consumers I think are long gone. Retailers need to recognise that and make sure the consumers are happy with the product and the price."